Steve Schaefer
,
Forbes Staff
If you can put the word markets after it, I cover it.

(Image credit: AFP/Getty Images via @daylife)

It has gotten somewhat fashionable in recent months to be bearish on Apple, and many of those who believed the stock’s lofty prices back in September were getting long in the tooth have taken their bows. Don’t put Kim Caughey Forrest in that camp though.

“I’m a bear and I’ve been incredibly wrong,” admits Forrest, senior analyst at Pittsburgh-based Fort Pitt Capital. “For about 18 months [in every client meeting] all the talk was ‘why don’t we own Apple?’” But looking prescient as the stock stumbled from over $700 in late September to below $500 in recent days has hardly changed Forrest’s mind.

“What Apple does, it does really well,” she says, but the former software engineer doubts those who suggest the company will continue to curry favor in the corporate world and eventually be the device leader for a more mobile workforce.

The iPhone and iPad are lite machines from a productivity standpoint, Forrest argues, “and now we’re getting to the point for a mobile workforce where the emphasis needs to be on work, not mobile.”

The slide from over $700 to the $500 threshold hasn’t tempted Forrest either. For her money, Apple is “untouchable” from a value standpoint. Why? The momentum crowd.

“Problem is you have the faithful who say ‘this quarter will be different’ every single quarter,” she says. “I mean, if you haven’t learned this from watching Microsoft…”

In Forrest’s eyes, all those momentum players who rode the stock through its nearly unabated run higher into September 2012 need to be scared off before she’ll be tempted. Those investors, she expects, will seize on rallies to make their exit, or pile back in on good news like an upbeat quarter or a wireless deal with China Mobile.

Edward Painvin is not nearly as negative on Apple stock as Forrest, but the chief investment officer at Chase Investment Counsel in Charlottesville, Virginia is hardly an unrestrained bull either. He thinks the stock is marking the low end of a trading range between $480 and $600, but that it will remain range-bound for some time.

Chase pared back its Apple bet in late November, right around the stock’s retest of the 200-day moving average it broke below earlier that month, and is underweight the stock relative to its benchmark with a 4.7% position in the Chase Growth Fund. While Painvin is wary of adding more with the stock stuck in a trading range, he is not bolting for the exits either.

"We have not been bottom fishing," he says. "It's difficult to get overly aggressive [in the technology space] as gross margins compress." He does expect the trough to hit in the quarterly results to be reported after the bell Wednesday though, arguing that Verizon's report Tuesday, which showed a sharp uptick in iPhone activations from the company's wireless unit, bodes well.

The encouraging news for Apple from Verizon’s quarter does not quite offset concerns about rising competition in the smartphone space. Citigroup analyst Glen Yeung anticipates falling market share due to gains from Samsung in both the December and the March quarters, and an introduction of an iterative update in the next few months – an iPhone 5S for instance – won’t be enough to stop that trend he says.

Meanwhile, Research In Motion is about to introduce its BlackBerry 10 operating system and fresh devices later this month, bringing another updated rival into the smartphone fray.

Yeung, who has a neutral rating and cut his target price to $500 Jan. 18, is in the same camp as Painvin, figuring Apple shares are range-bound with shareholders more concerned about guidance for the March quarter than performance during the holiday season.

JJ Kinahan, chief derivatives strategist at TD Ameritrade, says pre-earnings options activity in Apple shares sheds some light on how investors are looking at the Cupertino, Calif-based company. The bulk of the activity in calls – which give buyers the option to purchase stock at a pre-determined price – has been further out on the curve at strike prices like $525 and $550.

Buyers of those options are betting that a big quarter from the iPhone-maker will send the stock shooting to those levels from its current perch just over $500, that “if they have a good quarter they crush it,” Kinahan says.

On the flip side, put buyers (who are buying the right to sell at a given price) seem to be drawing a line in the sand right at $500, a key psychological level and Friday’s exact closing price.

Contrast that with Google, says Kinahan, where options activity before Tuesday's solid earnings indicated call buyers were playing upside and put buyers were mostly interested in "disaster insurance." He doesn't think traders in Google options see "the sudden downside risk" they do in Apple shares.

A year ago, Apple reported fiscal first-quarter earnings of $13.87 per share. The consensus EPS estimate of $13.47 would equal a 2.9% decline, the first year-over-year drop in over nine years according to FactSet senior research analyst John Butters.

Estimates rapidly started falling in mid-October, leading the more lengthy tumble in the stock price. In his Jan. 17 research note, Butters notes that the average analyst target price of $729.84 was some 44% above Apple's most recent close, the biggest such disparity for any S&P 500 stock.

One thing to watch: whether buyers will be coaxed into the stock by a hefty stock buyback or a significant dividend increase. Painvin thinks the company has plenty of financial wherewithal to do so and "at these levels it would be viewed constructively," whereas at the $650 or $700 point it might have dinged the perception of the company as "a growth play in perpetuity."

Shares of Apple inched up 0.3% Wednesday pre-market, after closing at $504.77 Tuesday. The stock is down 28.4% from its September peak of $705.07, but still up more than 20% over the last 12 months.